Question

George and Darlene purchased a condominium with a $240,000 mortgage with a 4.45% annual interest rate for 20 years. What are their monthly payments? Express your answer to the nearest cen ($0.01). Round any intermediate decimal values in your calculations to at least 4-decimal places (5decimal places is preferred ).

Answer 1

To calculate George and Darlene's monthly mortgage payments, the loan amortization formula is used with the given values. The principal is $240,000, the annual interest rate is 4.45%, converted to a monthly rate, over a 20-year term, resulting in a monthly payment that will be rounded to the nearest cent.

Step-by-step explanation:

George and Darlene have taken out a $240,000 mortgage with a 4.45% annual interest rate for 20 years. To calculate their monthly payments, we can use the loan amortization formula:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]

Where:

• M = monthly payment
• P = principal amount ($240,000)
• i = monthly interest rate (4.45% annual rate / 12 months = 0.370833% per month)
• n = total number of payments (20 years * 12 months/year = 240 payments)

Plugging in the numbers:

M = $240,000 [ 0.00370833(1 + 0.00370833)^240 ] / [ (1 + 0.00370833)^240 – 1 ]

After performing the calculations, we will find the monthly payment value, rounded to the nearest cent.